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Weekly Market Report - October 7, 2025

  • Writer: Broker Support
    Broker Support
  • Oct 12
  • 14 min read

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Paramount sale raises questions about office recovery


Rithm Capital's unexpected acquisition of Paramount Group for $1.6 billion marks a significant shift in the real estate landscape, following interest from major players like Blackstone. The deal, which entails taking over 13 million square feet of office space at a 40% discount to book value, reflects Rithm's strategic move to diversify its portfolio amid improving market fundamentals. CEO Michael Nierenberg believes this represents a "value-add opportunity" in a recovering office sector. Paramount, facing shareholder pressure over executive compensation and ongoing SEC investigations, revealed a net loss of $19.8 million recently, highlighting its precarious position.


Rithm's offer of $6.60 per share stands against a prior stock price of $7.39, sparking mixed reactions among analysts regarding its implications for the New York office market. As Rithm anticipates that the investment could double, questions loom about the future of Paramount's long-time CEO Albert Behler post-acquisition, amid his controversial management practices. This acquisition could signal a confidence boost for NYC's office market yet raises concerns for Paramount shareholders.


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SL Green, Silverstein and Soloviev didn’t commit to alternatives


Three developers, SL Green, Silverstein Properties, and the Soloviev Group, recently faced rejections for their casino proposals in Manhattan, but the outlook for their sites remains optimistic. SL Green's intended casino at 1515 Broadway in Times Square might transition into residential or upgraded office space, as noted by Piper Sandler's Alex Goldfarb. Similarly, Silverstein's site on the Far West Side could develop into residential apartments, reflecting nearby growth, which includes a project by Silverstein himself. Despite the casino setback, some believe these redevelopment avenues could yield significant returns. Silverstein’s COO anticipates a long vacancy, yet industry insight suggests otherwise, with increasing demand for residential properties in the area.


As for Soloviev’s site near the United Nations, where plans for condo projects have stalled, there’s speculation around potential residential development or a sale, indicating a reassessment of its value. The future of these properties could align with broader changes in Manhattan’s real estate market. Meanwhile, other developers in Brooklyn, the Bronx, and Queens may need to consider alternative plans as critical votes on new proposals loom. The sentiment suggests that although casino dreams have failed, the path forward for these sites remains vibrant with residential potential.


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601W Companies in contract to purchase 205 East 42nd Street


The Durst Organization is selling its property at 205 East 42nd Street in Midtown East to 601W Companies for $165 million. The 532,000-square-foot, 21-story building, developed in 1927 by Joseph Durst, was renovated for $15 million in 2013. Major tenants include the City University of New York, Fedcap Rehabilitation Services, and the United Way of New York City, with a former WeWork space now occupied by a different co-working company. The sale price equates to $310 per square foot. The building features modernized elevators and an updated Art Deco-style lobby due to the 2013 renovation, along with over 3,600 square feet of green roofs and retail space on the ground level, conveniently located near Grand Central Terminal. Durst has not commented on the sale, nor has 601W.


Additionally, last month, Wells Fargo, JPMorgan Chase, and Bank of America initiated a $1.3 billion commercial mortgage-backed security for Durst's tower at 151 West 42nd Street, which will settle about $1.1 billion of existing debt and provide nearly $40 million in reserves and closing costs. Concurrently, 601W is negotiating to buy the 1.4 million-square-foot property at 175 West Jackson Boulevard in Chicago, further solidifying its role as a significant buyer of distressed office spaces, with notable assets like the Old Post Office and Aon Center in its portfolio.


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Company looks to offload Plaza District space after $22M upgrade


Tishman Speyer and Singapore’s GIC are aiming to sell the office segment of the CitySpire tower for $150 million. This follows a $22 million renovation in 2020, enhancing the nearly 380,000-square-foot office condo at 150 West 56th Street, which is currently 98 percent leased. The offering highlights the asset as providing “stability and strategic opportunity, with minimal capital requirements.” The office spans 24 floors within the tower, originally developed by Bruce Eichner in 1990, who controversially exceeded height limits. Tishman took a 51 percent stake in the office in 2004.


The recent upgrade involved modernizing the lobby, elevators, and cooling systems, alongside creating prebuilt suites. Notable tenants include Windels Marx Lane & Mittendorf and the New York Road Runners. Marketing materials suggest that the 31,000-square-foot Studio could be modified for traditional office use or as an amenity space based on investor interest. Recently, Tishman has been active in the market, selling three Beverly Hills office buildings and acquiring a property in Soho.


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Institutional investors still avoid broad bets on the sector, but painstakingly selected niches are doing well


Marx Realty's 10 Grand Central, a renovated 35-story office building, is nearly filled, attracting high tenant demand that led to multiple rent increases. New York City's office market, once hit hard by Covid, is showing signs of recovery with Moody's reporting the lowest office vacancy rates among major cities. Foot traffic and leasing activity in Midtown are surging, prompting significant transactions such as RXR's $1 billion purchase of 590 Madison Avenue. Blackstone is re-entering the market by investing in office spaces, suggesting broader confidence. Vacancy rates in prime locations like Park Avenue are falling due to increased demand for amenities. Owners are making substantial upgrades to attract tenants. An uptick in office leasing has been noted, yet uncertainty persists as institutional investors remain cautious.


Recent sales reflect a tentative resurgence, exemplified by 292 Madison Avenue's and 1370 Broadway’s acquisitions at lower prices, indicating the market's bottom line might be emerging. By summer 2025, confidence returns as employment in NYC rebounds faster than elsewhere, with continued investments by firms like Blackstone and Rithm Capital signaling recovery. The dual reality of distress and recovery in the office sector suggests a cautious but hopeful path forward as landlords secure new tenants amidst challenges.


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Leasing activity posts hottest start to year since 2002


Manhattan's office market is experiencing a notable recovery, highlighted by significant deals from major tenants such as Deloitte, Guggenheim Partners, and Salesforce during the third quarter. Leasing activity has surged to over 30 million square feet for the year, marking the highest levels since 2002 and exceeding pre-Covid benchmarks. In Q3 alone, tenants absorbed 9.4 million square feet, a 2 percent rise from Q2 and nearly 27 percent more than the average for the past five years. The availability rate has decreased to 14.6 percent, marking the lowest since December 2020, while average asking rents have begun to increase.


Deloitte's lease of 807,000 square feet at 70 Hudson Yards was the quarter's largest. Additionally, sublet inventory has nearly shrunk by 40 percent over two years, returning to near pre-pandemic levels. Average asking rents reached $74.89 per square foot, with Class B offices seeing a notable rise. Investor interest is also rekindled, with $1.6 billion in office buildings sold in Q3. According to Colliers' Franklin Wallach, continued momentum is crucial for a complete recovery through the end of 2025 and into 2026.


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Asset manager subleases 194K sf from Meta at Related building


BlackRock is subleasing 194,000 square feet from Meta at 50 Hudson Yards, increasing its total space in the building to 1.24 million square feet. This sublease constitutes a significant portion of the 250,000 square feet that Meta made available at the end of 2022. The deal is indicative of a strong third quarter for New York City office leasing, with BlackRock demonstrating a willingness to expand its headquarters rapidly. The terms of the sublease were not disclosed, but when the building opened three years prior, asking rents ranged from $175 to $240 per square foot, while the average rent in the area was reported at $153.52 per square foot in the second quarter by Avison Young.


A JLL team facilitated the sublease. With this deal, BlackRock's presence in the tower, which has a total of 2.9 million square feet, has grown significantly; the asset manager previously expanded by 50,000 square feet last July. In the third quarter, Manhattan's office leasing totaled 9.4 million square feet, marking a 2 percent increase from the prior quarter and nearly 27 percent above the five-year average, with year-to-date leasing exceeding pre-COVID levels, indicating robust demand.


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Central Park Conservancy protests lost bid as city locks in 20-year deal


Mayor Eric Adams is finalizing a 20-year agreement with Related Companies to operate Wollman Rink, surpassing bids from the Trump Organization and the Central Park Conservancy. The deal entails $10.9 million in upgrades and $91 million in concession fees, although the Conservancy offered a $120 million donation for a comprehensive redevelopment plan for the park's southeast corner. Related will enhance the rink with a new ice-making system and improved infrastructure. The selection of Wollman Park Partners II, a Related affiliate, was confirmed by the Parks Department after the Trump Organization's contract was annulled in 2021 following the Jan. 6 insurrection.


Critics, including Conservancy President Betsy Smith, condemned the decision, advocating for their proposal that promised additional amenities and cultural programming. The agreement is urgent, as it was pushed through before the Franchise Concession Review Committee’s meeting on October 16, ensuring the deal aligns with Adams's tenure before he departs in December. Related’s influence in city-sponsored projects is set to expand, following a recent announcement of 4,000 new apartments, including 764 affordable units, at Hudson Yards.


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Six years after radical rent law, selling buildings has never been more painful


The Housing Stability and Tenant Protection Act of 2019 has led to a dramatic 75% devaluation of rent-stabilized properties in New York. Landlords now face stringent documentation requirements for unit deregulation and the threat of expensive rent-overcharge lawsuits, including potential triple damages. A broker lamented about the dire state of the market, where he described selling these buildings as a "minefield" due to insufficient documentation from prior years. The risk of legal repercussions over paperwork inconsistency is high, with potential liabilities exceeding $200,000.


The gross rent multiplier for assessing property values dropped significantly, highlighting the stark decline. Despite urging property owners to sell before prices fell further, many hesitated, hoping for legislative changes that never materialized. The Community Opportunity to Purchase Act poses additional risks, potentially driving values down further. The bleak outlook suggests no immediate relief for landlords, as tenant advocacy continues to reshape legislation unfavorable to property owners, pushing for socialized management of rent-stabilized housing.


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Investors including Baupost Group and King Street Capital Management are supporting RXR's new office venture, Gemini Office Venture, which aims to capitalize on reduced prices for premier buildings. RXR holds a majority stake in the platform, joined by Criterion Real Estate Capital, Liberty Mutual Investments, and Abrams Capital. The venture has completed over $3.5 billion in transactions and is poised for further acquisitions as interest in New York's office market rebounds post-pandemic. Office leasing activity in Manhattan rose by 38% in the first eight months of the year, indicating increased demand as employers invite workers back.


RXR CEO Scott Rechler expressed confidence in New York's recovery based on leasing trends. Gemini's portfolio currently includes three Manhattan offices, with ownership stakes ranging from 49% to 51%, and notable purchases like 590 Madison Ave. planned for renovations. The venture is also active in acquiring properties as market conditions enhance pricing attractiveness, with discounts nearing 50% from prior cycles. RXR is targeting further property deals, including an expanded credit partnership with Liberty Mutual to invest up to $1 billion in U.S. apartments, showcasing the firm's aggressive market strategy.


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Rudin is expanding its development portfolio by converting its office tower at 355 Lexington Ave. in Midtown into a 297-unit residential building, as per plans filed with the Department of Buildings. The tower’s height will increase from 22 stories and 241 feet to 26 stories and 278 feet, encompassing around 280,000 square feet with retail on the ground floor. This marks Rudin's second major office-to-residential conversion in Midtown, following plans to transform its building at 845 Third Ave. into a 411-unit residential property. Both projects will feature market rate and affordable apartments to address the city's housing demand.


Previously, in February, Rudin had considered a residential conversion for the building, which was constructed in 1959, and informed tenants about potential relocations. Current office asking rents at the location range from $62 to $76 per square foot. Historically, the building housed Amtorg Trading Co., the Soviet Union’s trade group, and was later divided into smaller suites to attract tenants. Recently, it was leased to Applause, though it is unclear if they remain amid the pending conversion.


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In Manhattan's office market, the first three quarters of the year have achieved the highest leasing activity since 2002. In the third quarter alone, about 9.4 million square feet were leased, totaling over 30 million square feet year-to-date. Despite strong leasing figures, projections indicate that 2025 may reach around 40.1 million square feet, still short of the 43 million recorded in 2019. Notable leases included Deloitte at 70 Hudson Yards and Guggenheim Partners at 330 Madison Ave.


The average asking rent rose to $74.89 per square foot, though it remains below March 2020 levels. The availability rate fell to 14.6%, marking a sustained decrease for six consecutive quarters. Midtown South led leasing activity, while Midtown firms also saw increased rentals but lower volumes compared to last year. Downtown recorded minimal leasing, with an average rent of $59.15 per square foot. Overall, recovery efforts must continue towards the end of 2025 and into 2026 for a complete rebound.


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Artificial intelligence companies are increasingly making their mark on Manhattan's office leasing scene, contrasting with the dominant presence of larger tech firms. Over the past few years, AI-focused firms have occupied significant space in Midtown South, with 486,000 square feet leased in the first nine months of this year—surpassing pre-pandemic levels. Smaller, growth-stage companies are driving much of this activity as major investors fuel the sector. Key recent leases include Salesforce expanding at 3 Bryant Park and OpenAI securing space at the Puck Building. As corporate investment in AI hits record levels, many smaller firms show strong capital backing, indicating ongoing demand. Most AI companies prioritize collaboration, hence favoring high-quality office environments to enhance productivity and culture.


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Ikea is expanding in New York City, having recently acquired 529 Broadway for $213 million from Jeff Sutton, a retail real estate mogul. Although the property record does not mention Ikea explicitly, it aligns with the company's headquarters in Pennsylvania and includes signatures from its legal team. Ingka Investments, Ikea's investment division, confirmed the acquisition, revealing plans for a 25,000 square foot store on the lower two floors, while the top four floors will be converted into office space. This acquisition marks Ikea's fourth investment in key commercial real estate to facilitate its growth in major urban centers, emphasizing affordability.


Sutton, alongside his partners, had purchased the SoHo building in 2012 for about $147 million and previously attempted to sell the property's debt. Currently, it houses a Nike store with more than ten years remaining on its lease. Ikea is also set to anchor Extell Development's new 570 Fifth Ave. project with an 80,000 square foot store, involving a $292 million investment. Additionally, Sutton has been active in real estate deals recently, selling properties to various tenants, totaling nearly $2 billion.


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Weill Cornell Medicine has acquired Sotheby’s former headquarters at 1334 York Ave. for $510 million, part of its plan to expand its Upper East Side campus. Sotheby’s has operated in this building since 1980 and will continue leasing space post-sale while preparing to move to the Breuer Building at 945 Madison Ave., which they purchased for $100 million in 2023. Proceeds from the sale will aid Sotheby's in reducing debt and enhancing operations, including renovating its leased office at York. In 2020, Sotheby's refinanced debt associated with the 506,000 square-foot property through a $484 million loan. Weill Cornell Medicine, already occupying 200,000 square feet under a 30-year lease, plans to build a research facility on the site despite federal funding cuts. The expansion aims to improve clinical services, enhancing connections between New Yorkers and the institution's physicians. 


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Meadow Partners is investing $36 million into the distressed Midtown Manhattan skyscraper at 1166 Sixth Ave., a move aligned with their rescue capital strategy amidst rising interest rates and tightening bank lending. The investment includes preferred equity, complementing funds from the building's owner, Edward J. Minskoff Equities, to address gaps after Wells Fargo's $235 million loan extension. This reflects a trend of corporate landlords seeking private credit lenders for refinancing due to increased borrowing costs and the pandemic's impact.


Kaplan emphasized the need for outside capital, highlighting how cash-strapped borrowers often rely on preferred equity as a solution. The ongoing demand for real estate financing has prompted significant capital raises, such as Blackstone’s $8 billion property debt fund aimed at bridging financing gaps. In the 1166 Sixth Ave. deal, additional investors included GreenBarn Investment Group and RXR, while Marsh & McLennan Cos. retains ownership of certain floors not involved in this transaction.


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Debt deal covers 220 Extended Stay America properties across 33 states


Blackstone and Starwood Capital Group are refinancing 220 Extended Stay America hotels located across 33 states with a $1.94 billion CMBS offering secured by 24,560 hotel keys. This refinancing is backed by a debt deal underwritten at a 65.4 percent loan-to-value ratio and an 8.27 percent cap rate. The joint venture, ESH Hospitality, is anticipated to finalize the notes by November, with JPMorgan Chase and Citi originating half the debt and other major banks sharing the remainder. The Class A bonds are rated AAA, while the two-year, interest-only loan allows for three one-year extension options at an estimated 250 basis points above the secured overnight financing rate.


The hotel portfolio, mainly concentrated in Florida, California, New Jersey, Maryland, and Massachusetts, has an average occupancy of 77 percent, generating a revenue per available room of $60.13. The hospitality sector is witnessing a split recovery, where luxury hotels flourish, but extended stay and economy segments are struggling to bounce back following pandemic disruptions. Blackstone and Starwood had acquired Extended Stay America for $6 billion in 2021.


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Smith Hill, Bain step in to finance 774-key hotel


Davidson Kempner Capital Management has secured a $216 million loan from Bain Capital Special Solutions and Smith Hill Capital to refinance the Westin New York Grand Central, located at 212 East 42nd Street. The funding will be used for capital improvements at the 774-key hotel, which Davidson Kempner purchased in 2019 for $302 million.  Atractive supply dynamics for the East Side hotel market as a reason for their investment. Previously, Davidson Kempner received $197 million from Goldman Sachs for the acquisition and planned $20 million in renovations.


In 2023, the firm repaid $63 million of the Goldman Sachs loan and secured an additional $150 million loan from Apollo Global Management. The 41-story hotel, originally developed by Harry Helmsley in 1981, features distinctive design elements, including a red-and-gold carpet and golden H’s. Sold by Helmsley’s estate in 2011 to Host Hotels for $313.5 million, the property underwent a $75 million renovation before reopening in 2012 under the Westin brand. Bain and Smith Hill have a joint venture aimed at providing capital solutions, having recently refinanced Gurney’s Montauk Resort with a $235 million loan.


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A new hotel may be developed in Manhattan at 23-27 Allen St., situated between Chinatown and the Lower East Side, by the Harlem-based developer Artifact. The proposed 9-story hotel would have approximately 40 rooms and ground-floor retail, covering nearly 40,000 square feet. The current buildings on the site, which include a restaurant supply store, an art gallery, and a produce import store, are planned for demolition. Artifact previously purchased 25 Allen St. for $5 million in 2022, while properties at 23 and 27 Allen St. remain unacquired.


Artifact, led by CEO Javier Martinez, has focused on projects primarily in Harlem, with developments including the Harlem Collective coworking space and plans for an 86-unit project. The Allen Street hotel project is notable, as new hotel construction in Manhattan has been limited since a 2021 law requiring special permits took effect, aiming to protect existing hotels but drawing criticism from the real estate sector concerned about post-pandemic recovery. A representative for Artifact has not commented on the project.


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Bilt Rewards, a financial-technology firm specializing in rewards for renters, is relocating its headquarters to Manhattan's Meatpacking District, moving from Bond Street under a 15-year lease signed on September 17. The relocation follows a valuation increase to $10.8 billion after raising $250 million in July. Bilt plans to add 625 new jobs to its existing 200 roles. CEO Ankur Jain emphasized the company's commitment to New York as a hub for innovation. The new office, slated to open early next year, will include a public Bilt-branded cafe. The building, owned by Nuveen, will undergo renovations to accommodate Bilt's operations as it also expands into offering rewards to homeowners.

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